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In this assignment I will illustrate in a report the financial state of Domestic Dog Homes by use of accounting ratios. The ratios I will be using are: -Solvency -Profitability -Performance

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Introduction

Unit 2 - P6 Ratio In this assignment I will illustrate in a report the financial state of Domestic Dog Homes by use of accounting ratios. The ratios I will be using are: - Solvency - Profitability - Performance Businesses use ratios to find out how solvent they are. Solvency Equation Current Ratio To find the Current Ratio we have to divide the current assets with the current liabilities. The Current ratio formulae show us how many assets a business owns in compared to their liabilities. Current Ratio formulae: Current Ratio = Current assets / Current liabilities Domestic Dog Homes current ratio: 2.46 = 40,275 / 16,367 Acid test ratio To find the Acid test ratio we have to take away the stock from the current assets and divide it by current liabilities. ...read more.

Middle

The Net profit percentage shows the profit as a percentage of turnover after all expenses have been taken out. Net profit percentage formulae: Net profit percentage = Net profit / Turnover x 100 Domestic Dog Home Net profit percentage: 18% = 42850 / 244600 x 100 Return on capital employed (ROCE) To work out the return on capital employed you have to divide the net profit with capital employed (including shareholder funds) and multiply it by 100. The purpose of this ratio is to show to money an investor is receiving back on capital as a percentage. ROCE formulae: ROCE = Net profit / Capital employed x 100 Domestic Dog Home ROCE: 30% = 42850 / 142408 x 100 Performance Equation Performance ratios are used by businesses to determine performance. ...read more.

Conclusion

Debtor's Collection Period formulae: Debtor's / Credit sales x 365 = Total number of days it takes to pay debtor's. Domestic Dog Home Debtor collection period: 23850 / 244600 x 365 = 37 Assets Turnover This ratio looks at the total assets that a business owns. To work out the Assets turnover you have to divide sales with total assets. Assets turnover formulae: Sales / Total Assets = Asset Turnover Domestic Dog Home Asset turnover: 250000 / 191775 = 1.30 This can be broken down further into: Sales / Fixed Assets and Sales / Current Assets The fixed asset turnover shows how much the business has invested in land and buildings. The current asset turnover shows how many sales are produced per � of current assets. ?? ?? ?? ?? Mohammed Aziz ...read more.

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